Stock Spin-offs: a reason and a move

Stock spin-offs provide a pool of stocks that can offer the small investors an edge, but it is only just that, an edge.

It's not a sure thing. It's not a buy it and forget it situation. It's not a money machine for the lazy.

One of the my favorite writers on investing and speculating, Gerald Loeb, wrote many years ago that what we are looking for is a reason and a move. All the great fundamentals in the world are worthless if the stock doesn't move. By the same token, just because a stock is going up in price right now doesn't mean that it will keep going up long enough to make any real money.

So the group of stock spin-offs provides an heightened percentage chance of finding companies that are likely to grow their stock prices. Then we need to check out their business fundamentals to winnow out the ones that are being spun off for reasons or in ways that make us not want to be involved. Finally, we need to let the price and volume prove to us that there is indeed something happening in the market's perception of what this one is worth.

Only when the reasons are validated by a move do I want to be getting involved.